Source: Pixabay                      

December 10, 2021

  • BoC inflation mandate renewed, employment levels to be considered in guidance
  • US CPI rises to 6.8% y/y from 6.2% y/y in October
  • US dollar remains opens with a bid, but eases after CPI

FX at a Glance

Source: IFXA Ltd/RP

USDCAD Snapshot   Open 1.2716-20, Overnight Range 1.2682-1.2723, Previous close 1.2713

USDCAD traders reverted to tracking broad US dollar sentiment and oil prices yesterday, after Wednesday’s BoC monetary policy meeting failed to deliver anything new. USDCAD climbed steadily and closed near its session peak, then consolidated those gains overnight.

Yesterday, BoC Deputy Governor Gravelle justified the BoC’s inaction despite sky-high inflation levels by blaming supply chain issues.

Meanwhile, the Canada’s Finance Minister and the BoC are supposed to announce that the BoC’s inflation target mandate of 2.0% will be renewed for another 5 years. That’s because the BoC has missed their target 4 out of the past 5 years, that eventually they may get it right.

USDCAD dipped following the US inflation data as data traders pared long USDCAD trades after inflation results met expectations.

Technical view:  The intraday USDCAD technicals are bullish above 1.2660, looking for a break above 1.2730 to extend gains to 1.2800.  A break below 1.2660 targets 1.2610.  Longer term, the uptrend line from the June low in the 1.2020 area is intact above 1.2405, while multiple resistance levels lurk in the 1.2850-1.3020 zone.

For today, USDCAD support is at 1.2760 and 1.2610.  Resistance is at 1.2740 and 1.2780.  Today’s Range 1.2640-1.2740

Chart USDCAD monthly

Source: Saxo Bank

G-10 FX recap and outlook

The US dollar opened with a bid ahead of today’s US CPI data. US inflation rose 6.8% y/y, as expected. The month over month data was higher than forecast but below October’s reading. The results were close enough to forecasts that traders anticipating much higher results were forced to trim positions and the US dollar retreated, slightly.

The major Asia equity indexes closed lower with Japan’s Nikkei 225 and Hong Long’s Hang Seng losing 1.0% and 1.07%, respectively. European bourses lost ground early than turned positive after the US CPI report. DJIA and S&P 500 futures added to earlier gains and Wall Street is poised to open higher. WTI oil prices climbed 1.72% from yesterday’s close and gold flipped from a loss to a gain in early NY trading, The US 10-year Treasury yield retreated from and overnight peak of 1.518% to 1.492%.

Markets are ignoring geopolitical risks and Omicron variant concerns for the moment although the Russia/Ukraine situation could go pear-shaped at any time.

EURUSD opened at the bottom of its overnight range than climbed from 1.1266 to 1.1300 after the inflation data. Earlier reports that the ECB is considering an expansion to the Asset Purchase program, is capping gains, as is anticipation for a hawkish FOMC meeting, Wednesday. EURUSD technicals are bearish below 1.1340.

GBPUSD traded in a 1.3189-1.3240 band with the peak occurring after the US inflation report. Prices have inched lower to 1.3218. UK inflation expectations jumped to 3.2% from 2.7%, and November GDP was weaker than expected. On-going measures to combat the Omicron variant outbreak are capping gains.

USDJPY rallied then dipped coinciding with US 10-year Treasury yield fluctuations.

AUDUSD extended overnight gains in NY with prices underpinned by the modestly positive RBA outlooks and downgraded fears around the Omicron variant.

Chart of the Day:  US CPI change

Source: Bureau of Labor Statistics

FX open, high, low, previous close as of 6:00 am ET

Chart: Saxo Bank

China Snapshot

Today’s Bank of China Fix 6.3702, Previous 6.3498

Shanghai Shenzhen CSI 300 fell 0.46% to 5,055.12

China raises FX Reserve Requirement Ratio (RRR) for banks 200 bps, from 7.0% to 9.0% yesterday. Analysts say it is an overt move to push back against yuan appreciation.

Chart: USDCNY 1 month

Source: Yahoo Finance